Special Issue Information

Dear Colleagues,

One of the key lessons of the recent crisis is the close interdependence between the detailed features of financial systems and macroeconomic outcomes. Thus, the tight separation of financial and macroeconomic issues needs to be overcome. Initiatives to better analyze “macrofinancial” linkages and to conduct “macroprudential” policy have mushroomed since the start of the crisis, although they generally fall short of a fully joined-up framework. From this perspective, the focus of this volume will be:

First, on the financial regulation understood as a cluster of interrelated policies designed to ensure the proper functioning and integrity of financial systems. This scope includes public regulation and supervision of bank capital, leverage, liquidity, and risk management; control of moral hazard and financial industry incentives; protection of the customers of financial services; and the regulation of capital markets. Other reform areas such as capital-flow controls, prevention of money laundering, and the taxation of financial activities can complement this agenda,

and

Second, Banks had mismanaged their liquidity positions and failed to secure stable and diversified sources of income and to contain costs, while opaque balance sheets significantly impaired analyses of risk, thus preventing a timely awareness of the weakness of banks’ capital buffers. The lessons learned from the crisis have influenced markets’ and analysts’ perception of banks and have led to new regulatory initiatives that will shape banks’ post-crisis business models. The financial crisis has shown that banks need to better understand interactions between risk, return, capital and liquidity. Banks should therefore focus on developing a holistic approach. This means not only involving all business units and areas, but also taking into account certain external factors, such as macroeconomic scenarios.

Prof. Dr. Nicholas ApergisProf. Dr. James Earl PayneGuest Editor

Submission

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. Papers will be published continuously (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are refereed through a peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. International Journal of Financial Studies is an international peer-reviewed Open Access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. For the first couple of issues the Article Processing Charge (APC) will be waived for well-prepared manuscripts.
English correction and/or formatting fees of 250 CHF (Swiss Francs) will be charged in certain cases for those articles accepted for publication that require extensive additional formatting and/or English corrections.

Abstract: The sub-prime financial crisis was not simply the result of excessive leverage and inadequate capital, but it was brewing for some time as a result of a gradual deterioration of business leadership, lapses in governance and in the regulatory framework (particularly in derivatives markets), and an ineffective risk-management framework.[...]

Abstract: Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs, built in certain recommended ways, have to be paid. Markets prove to behave in manners that resemble those of complete ones for a wide variety of transaction-cost types. The results are important, but not exclusively, for the pricing of options with transaction costs.

Abstract: This paper addresses the relationship between stock markets and credit default swaps (CDS) markets. In particular, I aim to gauge if the co-movement between stock prices and sovereign CDS spreads increases with the deterioration of the credit quality of sovereign debt. The analysis of correlations, Granger causality, cointegration, and the results of an error-correction model represented in a state space form show a close link between these markets, but do not evidence that the co-movement increases in periods of financial distress. I also analyze the transmission of volatility between the two markets. The results do not support the hypothesis that volatility propagation surges during financial distress periods. On the contrary, for some cases, the data suggests that the lead-lag relationships between the two markets volatility are stronger during stable periods.

Abstract: This empirical study analyzes the information and predictive content of the Baltic Dry Index (BDI) with respect to a range of financial assets and the macroeconomy. By using panel methodological approaches and daily data spanning the period 1985–2012, the empirical analysis documents the joint predictability capacity of the BDI for both financial assets and industrial production. The results reveal the role of the BDI in predicting the future course of the real economy, yielding a link between financial asset markets and the macroeconomy.

Abstract: One proxy of price rationing of credit is an aggregation of information on interest rates, while loan officer survey data measures quantity rationing of credit, meaning some borrowers are denied loans. The latter Granger causes real GDP but the former does not. The loan officer survey is a better leading indicator of credit market conditions that affect real activity.

Abstract: In response to the financial crisis of 2008, the Federal Reserve radically increased the monetary base. Banks responded by increasing excess reserves rather than increasing bank loans, and the public responded with a substantial flight to liquidity in the form of currency and demand deposits. As a result, the money-supply multipliers substantially decreased, so that the actual money supply measures grew more moderately than the base. The sustained multiplier-collapse spawned reexamination of monetary versus fiscal theories of price-level determination. This paper, however, presents decompositions of the money-multiplier collapse into changes in the currency-to-deposit ratios, and changes in the reserve-to-deposit ratio. By doing so, possible near-term increases in the multipliers are simulated so that the possibility of either full or partial restoration to their pre-crisis levels is assessed. Policy possibilities for controlling the money supply over various horizons follow. This analysis illustrates the Federal Reserve’s exit dilemma that results from its financial-crisis policy.